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Split emerges in Irish cabinet over response to Apple tax ruling

EU state aid

Split emerges in Irish cabinet over response to Apple tax ruling

No unanimity among ministers over right response to controversial EU state-aid verdict

© Bloomberg

Enda Kenny’s hopes of forging an aggressive and united response to the Apple tax ruling suffered a significant setback on Wednesday, after Ireland’s prime minister failed to win cabinet backing for an immediate move to launch an appeal through the European courts.

At a lengthy emergency cabinet meeting, several members of his coalition government asked for more time to study the European Commission verdict before deciding whether to back the appeal process.

Mr Kenny’s office said the cabinet meeting had been adjourned until Friday to give ministers “further time to reflect on the issues and to clarify a number of legal and technical issues” with Ireland’s attorney-general.

But the failure to reach a consensus is a severe blow for Mr Kenny and Michael Noonan, his finance minister, who had expected to forge a unanimous political response to Tuesday’s shock ruling from Brussels that Ireland gave €13bn of illegal state aid to the US technology company.

While the fragile minority government’s future is not under immediate threat, the Taoiseach’s inability to forge a united cabinet response to the biggest political crisis it has faced since being re-elected earlier this year suggests its days may be numbered, according to political observers in Dublin.

The commission’s conclusion that Ireland in effect facilitated Apple in avoiding billions of dollars of taxes on its global operations over many years has caused shock and disbelief in Dublin.

It has also sparked a national debate about whether the government should accept such an unexpected tax windfall. That has influenced the thinking of some ministers, who remain unconvinced that an immediate appeal and an outright rejection of the commission’s findings are in the public interest.

Mr Kenny’s cabinet includes some ministers who are not aligned with his centre-right Fine Gael party. One of them, children’s minister Katherine Zappone, said after the cabinet meeting that “given the complex issues involved it would have been wrong to rush into a decision today”.

Mr Noonan had argued that Ireland must appeal the ruling “to defend the integrity of our tax system, to provide tax certainty to business, and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation”.

He and Mr Kenny saw the cabinet meeting as essentially a rubber-stamp for a decision already taken by the government to launch the appeal.

© Reuters

But Mr Kenny’s failure to persuade the cabinet to back him fully shows how deep the splits are in his administration over the Apple tax ruling. He may now be forced to recall parliament to debate the controversy before the holdout ministers give him their full support.

The deadlock has also left Mr Noonan exposed to criticism for aligning Ireland’s response so closely with that of Apple, the world’s largest company by market capitalisation, which is also appealing the ruling.

The scale of the penalty imposed on Apple — and by implication on Ireland — was unexpected by the authorities in Dublin, who had believed it would be hundreds of millions of euros rather than many billions.

“Thirteen billion changes everything,” said a member of Mr Kenny’s ruling Fine Gael party.

Ireland claims the commission ruling announced by Margrethe Vestager, EU competition commissioner, is unfair and contradictory.

Charlie Flanagan, Irish foreign minister, described the decision as “baffling” and said “there are a number of glaring inconsistencies in what the commission says”.

He cited as an example the fact that Ms Vestager said some of the tax the commission said Apple owed might be due to other EU member states.

Opposition politicians and a range of civil society groups in Ireland argue that the government should accept the commission ruling or adopt a more conciliatory approach to Brussels. Some opposition politicians say it would be “immoral” to reject the ruling and the windfall tax bonanza it offers.

The vehemence of the Irish government’s stance to the ruling is almost unprecedented in the country’s relations with the EU. It can be explained in part by a sense that Ireland is being singled out for harsh treatment by a commission making a “power grab” to take over tax policy from national governments in the wake of Brexit.

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